Customs Modernization Legislation Draft Released

Tweet

Nov. 8, 2021

This week the office of Senator Bill Cassidy (R-LA) released a discussion draft of the customs modernization legislation that has been considered as part of its 21st Century Customs Framework. According to an accompanying fact sheet published by the National Customs Brokers & Forwarders Association of America, the bill is designed to address changes to the international trade landscape which has “shifted significantly” over the past three decades due in large part to growth in e-commerce and an expansion of the global marketplace.

If passed, the 22-page bill would amend seventeen sections of the Tariff Act of 1930 and one provision of the 2015 Trade Facilitation and Trade Enforcement Act. At a high level the Act aims to both expand CBP’s authority to collect and use information from importers and exporters and to bolster CBP’s enforcement capabilities, particularly as to the low-value imports that dominate e-commerce imports.

On the information collection front the bill would authorize importers of record to file information “in advance of entry of the merchandise,” stating that any advance information filed would need to be accurate “to the best of the knowledge and belief of the party.” Those who failed to meet this accuracy standard would be subject to penalties. The bill also seeks to lift restrictions on how CBP can use mandatory advance electronic cargo information. Under the current regulations, CBP can only use advance information “for ensuring cargo safety and security, preventing smuggling, and commercial risk assessment targeting,” explicitly stating that such information shall not be used for any commercial enforcement purposes. The bill aims to allow CBP to use such information “for any lawful purpose.”

The bill additionally seeks to amend CBP’s data-collection policies by clarifying and expanding the scope of documentation and information the agency may collect from importers. When dealing with de minimis entries, which typically applies to entries for goods valued at less than $800 USD, the bill would allow CBP to request information relating to the future sale of an article in order to determine if it qualifies for de minimis entry under 19 USC 1321. A catch all provision in the bill would additionally authorize CBP to collect any information “otherwise reasonably necessary to determine whether the article” qualifies for de minimis entry. These changes are particularly important to CBP due to the continued growth of e-commerce. Many e-commerce transactions are imported using the “informal entry” process afforded to de minimis entries, entries that can typically enter the U.S. tariff-free. The bill proposes a penalty of $5,000 for first time civil violations of these regulations and a $10,000 penalty for subsequent violations.

In addition to expanding CBP’s authority to collect and use information from importers and exporters, a large portion of the bill also seeks to bolster CBP’s enforcement capabilities. If passed, the bill would broaden the agency’s authority to suspend exporters for certain activities and expand CBP’s options for handling and disposing of counterfeit merchandise, as well as CBP’s ability to assess and impose liability for false or fraudulent submissions.

The bill would expand the scope of entities from whom CBP may demand information from during the course of an investigation, and would expand CBP’s ability to work with investigators, allowing the agency to provide investigators with “nonpublic information” relating to any entity that may have played a role in the sale, importation, or facilitation of the importation of merchandise into the US. Additionally, the bill would allow CBP to declare merchandise which infringes on intellectual property rights to be “summarily forfeited” in certain instances.

Finally, the bill seeks to address issues relating to fraud and negligence under 19 USC 1592, which currently prohibits persons from either introducing or attempting to enter or introduce any merchandise into US commerce by means of fraud, gross negligence, or negligence. The bill would modify the current text by adding a “Standards for Fraud and Negligence” section to 19 USC 1592 that defines both fraud and negligence, striking the term “gross negligence” altogether. Based on the new definitions the term gross negligence would be subsumed into the new definition of fraud, which is defined in the bill as “an act … or omission, done knowingly or with deliberate ignorance or reckless disregard of the offender’s obligations to act in accordance with applicable provisions of law.” The bill defines negligence as an “act … or omission done through the failure to exercise the degree of reasonable care.”

At this point it is not clear whether there is support for eliminating gross negligence from 1592. Fraud requires that Customs prove intentional acts or omissions by the importer (or other party subject to penalty) while neither gross negligence nor negligence requires such a showing. This change is potentially beneficial for importers in that it would turn all violations of law short of fraud into negligence cases.

If you have questions relating to this discussion draft or Customs regulations in general do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.